IDEA #90
The myth of CEO experience
Firms that hire CEOs with prior experience as chief executives tend to underperform financially.
What you need to know
In the short term, markets react much more favourably to CEO appointments where the new chief is external and has prior CEO experience than if the appointment is an internal candidate with no prior top experience. However, research by Monika Hamori and Burak Koyuncu suggests that in the longer term, the benefits quickly evaporate. Tracking S&P500 companies’ return on assets performance for three years after CEO appointment, the researchers found companies that appointed CEOs with prior ...
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